Huge Natural Gas Find for Noble in Cyprus. Turkey Threatens to Block Development. Isreal and Cyprus to Become Energy Powerhouses.

For those looking deeper into the oil and gas industry, Cyprus has announces a massive natural gas discovery in its southern waters. Great news for the tiny nation state, and for the European Union as it desperately needs to diversify its energy imports.

The Wall Street Journal has reported that the find amounts to 30 years of natural gas use for Cyprus, and that it is attached to the 16 trillion cubic feet of gas located in Israel's Leviathan Field. The discovery was made by America's Noble Energy (NYSE: NBL), and it is sure to be a huge boon for the economy in the region.

Ethnic tensions in the region, however, are sure to ignite as the Turkish north and Greek south of the island nation will dispute over new found riches. Turkey does not recognize the independence of Cyprus and it has dispatched a naval escorted research vessel to conduct further tests in the region.

Cyprus' new natural gas find, currently known as "Cyprus Block 12," will help to make the country a net energy exporter to its European Union neighbours, and probably support the Greek-Cypriot south in its continued efforts for independence.

Bell Announces Share Buyback and Dividend Increase. The Company is Flush With Cash and Contributes Extra Money to DB Pension Plan.

Great news for Bell Canada (TSE: BCE) investors as the company announced an increase in its dividend by 5%, and a $250 million share buyback program.

The buyback program will be paid for with existing cash reserves. In addition, the company will make a voluntary $750 million contribution to the company's defined benefit plan for its employees. This will ease the burden of its defined benefit pension plan in future years. To be sure, over the last 5 years, the company has been gradually relieving itself of its Defined Benefit plans with the introduction of more Defined Contribution pension plans for its employees.

The defined contribution pension plans require that employees select from a number of investment choices and, though BCE contributes money to the plan, take responsibility for their own retirement savings. With populations living longer, and many workforces shrinking, defined contribution plans help employers save money by relieving them of the responsibility of caring for their employees into their old age.

With its dividend still above 5%, and the company flush with cash, BCE remains a good investment for many individuals in today's marketplace.

Full Disclosure: Matthew J. W. Clarke owns or indirectly controls shares in BCE.

Apple Faces Anti-Trust Suit Over its iBookstore in Europe. Microsoft and Amazon Must be Loving This.

A formal antitrust commission has been opened against Apple (Nasdaq: AAPL). The European Commission has filed a suit against Apple for e-book collusion in the European market.

iBookstore, News Corp (Nasdaq: NWSA), CBS (NYSE: CBS), and Pearson's (NYSE: PSO), among others, may have "engaged in anti-competitive practices affecting the sale of e-books in the European Economic Area." This complaint may been brought on by previous complaints by Amazon (Nasdaq: AMZN) about fixed price agreements between publishers and Apple in the region. 

Apple charges 30% to sell e-books through its iBookstore, which leaves publishers with ultimate pricing control, while Amazon prefers to retain pricing control for its own retail site.

How much the technological marketplace has changed since the advent of the first PC Wars between Apple and Microsoft (Nasdaq: MSFT). Where previously Microsoft was always the target of antitrust suits, now Apple has gained enough size and clout in the marketplace to be a viable target themselves. As investment website Motley Fool stated, "Bill Gates must be loving this."

Niall Ferguson Discusses Euro-Crisis, the Failure of the Euro, and the Chance of a Chinese Rescue.

Niall Ferguson labels the Euro as a "terrible idea," but one which now has to be saved out of necessity.

In a recent CBC interview, Ferguson notes that the continent's leaders have a deplorable understanding of what is needed to fix the crisis, and that they have made far too many mistakes already to expect that much will come of their efforts this week. Also, he notes that since there is no formal procedure to dismantle the monetary union, there would be inevitable chaos should it unwind. Thus, Germany and France have largely been left holding the bag on the debts of Greece, Italy, Portugal, Spain, and Ireland... and maybe more to come.

He also says that he can imagine a situation where the Euro-Crisis becomes so bad that the United Kingdom, not a current member of the monetary union, could leave the EU altogether.

Some experts believe that China might come in to save the day, but Ferguson claims that the country is so risk-adverse and afraid of being embarrassed by failure, that they will act very lightly, if noticeably at all.  

Wal-Mart and Foreign Retail Barred from India. Foreign Direct Investment Stalled. Is this Best for the Population?

Wal-Mart (NYSE: WMT) and other multinational retailers have been forced to wait even longer to enter the Indian marketplace.

Just last month, the Indian government announced plans to allow foreign retailers the option to own up to 51 percent of local supermarkets in major cities. This was seen by foreign companies as a positive sign of further international growth opportunities in the midst of slowing business and consumer activity in their home markets.

The government initially believed that more foreign competition and investment would result in lower prices for consumers and increased investment in infrastructure development in the country. However, government opposition parties and protesters declared that the expansion of foreign retailers in India would hurt small business and independent family owned retailers.

With the Indian economy slowing, and foreign direct investment in the country declining, many observers have suggested that India needs more foreign capital in order to help rectify a current account deficit.

To be sure, the Indian economy might benefit from increased levels of foreign direct investment, but there is definitely something positive to be drawn from the fact that Indian lawmakers are actually considering whether or not foreign domination of the retail sector will actually be the best thing for the local populations.

BlackBerry Bold 9790 Launch Causes Frenzy in Indonesia. Dozens are Injured... Brand is Exploding in the Developing World.

Dozens of Research in Motion customers were injured as more than 5,000 people line-up and stampede for the chance to buy a BlackBerry Bold 9790 in Jakarta, Indonesia.

The $540 phones were being sold at half-price to the first 1,000 customers, which caused a shopping frenzy. Indonesia is a country of over 240 million people and the BlackBerry is the hottest and most popular smart phone in the country. Its BBM, or BlackBerry Messenger service, is increasing in popularity and currently has 6 million users in the developing nation.

Clearly, though BlackBerry is under heavy pressure in North America and Europe as Apple and Android steal market-share, Research in Motion is doing very well in developing nations. Latin America and Asia are keen adopters of the BlackBerry, and the shopping frenzy, though causing some bad press for RIM management overseas, is a clear sign of a vibrant market and business for the company.

(Full Disclosure: Matthew J.W. Clarke owns or indirectly controls shares in Research in Motion TSE: RIM).

Research in Motion (RIM) Will Fail to Meet Year-End Guidance. Large PlayBook Writedown Costs the Firm Millions.

Research in Motion (RIM), dips below $17 U.S. per share in pre-market trading on the Nasdaq. The company has announced that it will be forced to take a $485 million write-down on the sale of over 150,000 PlayBook tablets and their inventories. It no longer expects to hit its full-year guidance of $5.25 - $6.00, but will still be profitable.

http://www.theglobeandmail.com/globe-investor/rim-to-miss-targets-take-playbook-hit/article2257745/

Loblaws Opens at Maple Leaf Gardens.

Maple Leaf Gardens has re-opened this week. Loblaw Companies Ltd. has developed a flagship supermarket to take advantage of the historic nature and appeal of Toronto's iconic hockey arena.

The store is 85,000 square feet and has an impressive array of choices. There is a 2,000 square foot kitchen, and ACE Bakeries, recently acquired by Loblaw (TSE: L), has an in-house factory to ensure everything is fresh and readily available.

Monuments to the Gardens and historic moments include tributes to The Beatles, Winston Churchill, Wayne Gretzky, Elvis Presley, and the Toronto Maple Leafs.

The company states that they are not sure where they are going next, but this type of conversion is something that they might complete again in another city. To be sure, it is very good press.

Warren Buffet Highlights 7 Stocks for Investment Potential. Two Stocks Stand Out as Different from the Others.

Warren Buffet has highlighted 7 stocks in the last quarter as good investments in the current market climate. Of the 7 stocks, 2 represent substantial departures from his previous investment discipline.

1. Buffet recently acquired over 32 million shares of IBM. Such a large investment in a technology company is a first for Mr. Buffet, who generally sticks to bread and butter stocks like with little need for increased levels of research and development. The prime example here is his long-running, and very successful investment in Coca-Cola.

Buffet's investment in IBM is centred around the fact that IBM generates a lion's share of its revenues from repeat and subscription based maintenance and service contracts. IBM has shed its consumer business (hence the advent of Lenovo laptops in North America), and decided to concentrate on corporate clients that sign long service contracts and are often less fickle to changes in technological trends or fashion.

Buffet has also purchased over 9 million shares of Intel. This stock has a great dividend, high cash flow generation, and excellent prospects in the growth of its server business. Intel's revenue increased 19% last quarter, which is evidence to the company's ability to execute well for shareholders in a difficult economic climate.

Full Disclosure: Matthew J.W. Clarke owns or indirectly controls shares in Intel (INTC).

Teachers Pension Plan Cancels Sale of Maple Leaf Sports and Entertainment. Bell and Rogers Dispute Over Media Rights. Leafs, Raptors, Marlies, and the FC are Cash Cows for Fund.

The Ontario Teachers Pension Plan has called off its sale of Maple Leaf Sports and Entertainment (MLSE). The asset has been a cash cow for the Teachers and after elongated talks with Bell and Rogers broke down, the Pension Plan has decided it is in its best interests to maintain its majority stake.

MLSE currently owns the Toronto Maple Leafs, the Toronto Raptors, the Toronto Marlies, the Toronto FC, and the Air Canada Centre. With the Leafs alone valued at over $500 million, the Teachers were hoping to fetch somewhere between $1.4 and $1.8 billion for their 80% stake in the regional sports powerhouse.

Why the talks to sell the company broke down is uncertain. Some say that Bell and Rogers could not agree on the media rights for the company, but others say that the price the Teachers wanted was simply too high. MLSE, however, it reported to generate approximately $650 million in revenue annually, making it a substantial enterprise for the pension fund, which will need more and more cash as aging teachers start collecting their benefits.

Potentially, the Teachers will probably keep their search for a buyer below the radar for awhile, until the plan needs to liquidate some holdings in the future to pay more retirees. So MLSE is off the block for now, but undoubtedly its sale will resurface as a news item again soon.

Tim Hortons Profits Soar to $103.6 Million in Quarter. McDonald's Pressure not Hurting Bottom Line. New Tim Hortons Lattes Will Ensure Margin Improvement.

This month, Canada's Tim Hortons reported that profits for the third quarter soared over 40% compared to last year. For the three month period Tim Hortons earned $103.6 million, well ahead of the $73 million earned last year. This was much better than many analysts had expected, and a clear sign that Tims is on the right track when it comes to new menu introductions and store expansions.

Also this year Tim Hortons announced that it is set to open 120 restaurants in the United Arab Emirates, Qatar, Bahrain, Kuwait and Oman over the next five years. A clear indication that the company is primed for international expansion beyond the United States of America.

Much of the growth over the last quarter was from the sale of its bakery unit, which sold for a whopping $475 million. But other positive signs were its same store sales growth, and the increased prospect of a substantial share buyback with the new cash infusion into the company.

Though there is increased competitive pressure from McDonald's and its aggressive expansion into the coffee business in Canada, Tim Hortons is weathering the battle very well, and even perhaps benefiting from an increased overall market for higher priced lattes now in the lineup.

Shoppers Drug Mart Earnings Keep Investors Happy. New Opportunity With Zellers Closing.

Canada's Shoppers Drug Mart (TSE: SC) could be primed for a nice growth opportunity following the closure of Zellers' pharmacies in 2012. Though Target has announced plans to open its own pharmacies in 2013 once it begins expanding into Zellers' locations, the hiatus will give Shoppers and other pharmacies, including Rexall, some time to either poach or purchase the current client files.

Shoppers also recently announced an increase in overall sales of 2.1% over the third quarter of last year, and a rise in net earnings of 5%. Good news for investors who have been worried about earnings deflation in the prescription drug category due to new legislation in Ontario, Quebec, and British Columbia that have limited generic drug prices to 25% of the patented version.

Shoppers shares are up almost 12% in the last year and well ahead of an overall market, which is down 12%.

Full Disclosure: (Matthew Clarke currently owns or indirectly control shares in Shoppers Drug Mart).

Consumers’ financial literacy a key focus for Ottawa: Flaherty - The Globe and Mail

Consumers’ financial literacy a key focus for Ottawa: Flaherty - The Globe and Mail:

"The $5-million task force, headed by Sun Life Financial chief executive officer Donald Stewart, is charged with developing Canada's first national strategy to improve financial awareness.

After embarking on a cross-country tour, the task force released a report earlier this year that contained 30 recommendations on how to improve financial literacy. It said education, starting as early as elementary school, is the best way to sow the seeds of knowledge and skills Canadians need to save, invest, buy homes and plan for retirement later in life.

Other initiatives it recommended include the establishment of dedicated national leader on literacy, and that Ottawa create a one-stop website where Canadians can obtain information on everything from mortgages to retirement planning.

Financial literacy is usually defined as a combination of knowledge of financial matters and numerical skills, such as an understanding compound interest, as well as having the ability to put those skills into practice in making financial decisions."

Hopefully the federal and provincial governments follow-up on this idea with a concerted effort to actually make financial literacy courses mandatory in high-schools. The fact that Shakespeare, the Boer War, and an understanding of quadratic equations is mandatory, but consumer lending and banking is not is a key reason why our population is steering itself toward the financial abyss. Lobby your MPP's, MP's, and School Boards, and the Minister of Education to help this country get its act together. An uneducated populace is easily duped by middlemen and financiers.

Apple, IBM, Intel, and Microsoft to Report Profits. Pay Close Attention if Looking to Make Money in Technology Stocks.

The coming week is going to be very interesting for anyone interested in the stock markets tech. heavyweights. IBM, Intel, Microsoft, and Apple will be posting their results, which is sure to move markets and force investors to take another look at fundamentals like earnings, sales, and profit margins... at least for awhile, until we revert back to panic trading on the least bit of financial news coming out of Europe.
IBM is releasing its numbers first. On Monday, it will probably report expectantly dull, but healthy and sustainable revenue and earnings growth. This company has been doing everything right recently and analysts and investors alike will generally sing its praises. Investors like dependability and predictability, it helps them to sleep at night. IBM has achieved well on both counts. In the past eight quarters it has exceeded per share profit expectations by about 2.4%, nothing spectacular, but helps an investor know what he is buying. If IBM says it will make a certain amount of money, they can generally deliver.

Intel has been a little more difficult for investors. Performance wise, it has not been all bad. It has a steady and attractive dividend above 4%, almost unheard of in the tech arena, and it has largely avoided the collapse taking place in financials and many other areas of the market. The difficulty for Intel and its investors is the lackluster performance of PC sales, which are the bread and butter of Intel's chip business. This company needs more avenues of distribution, as PC's are being left in the dust by mobile and tablet sales as of late. Is this transition impossible for Intel, no! But they need to speed up the process.

According to Barron's Online, "consumer PCs have been steadily under-performing this year... tablet computers might be eating away at new purchases." And this is where our discussion of Microsoft kicks in. Microsoft has been increasing revenues at double digit paces, and profits are very healthy. Windows 7 was an effective operating system and sales were brisk. Coming online for Microsoft is Windows 7.5 for mobile devices and tablet computers, which should help give sales a kick as well.

Apple news, however, is most likely to be what excites investors when they report on Tuesday. Sales of the IPhone 4S are extraordinary, and the halo effect that their phones will continue to have on their computer business will be very positive. The more people that buy Apple phones and other gadgets, the more computers and media they continue to sell. This snowball effect for Apple has been going on for some time, and with the release of the IPhone 4S, and then the IPhone 5, it does not seem to be stopping.

Full Disclosure: My company or I own shares in Intel. (INTC).

Happy Investing : ) Comment or E-Mail with any Questions.

Microsoft Windows 7.5 Smartphones Could Sieze 20 Percent of Market by 2015. Microsoft to Provide Big Incentives to Retailers and Sales Staff in Coming Year.

Microsoft could control over 11 percent of the smartphone market by next year, according to some analysts, and 20 percent by 2015. In an attempt to reverse disappointing sales for its Windows 7.5 Phones, Microsoft is heavily targeting retailers, manufacturers, and mobile operators to increase interest in its models. Samsung, HTC Corp., and Nokia are expected to shift sales towards Microsoft Windows 7.5 in the near future.

With lots of cash on the balance sheet, and substantial amounts of free cash flow being generated on a monthly basis, Microsoft can afford to provide incentives and increase marketing efforts to boost sales. Much of the extra money being spent will probably go towards encouraging retail staff to push the phones on new and existing customers. Margins and profits on Apple phones are simply too high for Apple, and manufacturers and mobile operators are eagerly hoping to unlock their stranglehold on the market. Microsoft is providing an excellent opportunity for them to do so.

Nokia alone has more than 6,000 outlets, and it has already announced an exclusive deal with Microsoft for its smartphones after shelving plans for its own operating system. In the United States, many models are expected to cost less than $100, significantly less than phones provided by market leader Apple.

With the recent success of Windows 7, and an increased focus on tablets and smartphones at the company in the coming years, Microsoft shares are going to start looking very cheap. Currently selling from $25-$27, the stock is at similar levels to a decade ago. Investors who buy Microsoft are paid to wait by collecting a dividend of about 2.4%, and the downside risk at this point is very minimal.

Happy Investing : ) Post or E-Mail your Questions and Comments.

Maple seeks regulator OK for TSX bid - Business - CBC News

Maple seeks regulator OK for TSX bid - Business - CBC News:

The Canadian consortium of banks and insurance companies knows as "Maple Group" has finally submitted its proposal to acquire TMX Group (Canada's largest stock and options exchange owner) to four provincial regulators. Regulators will now begin seeking public comment on the $3.8 billion deal.

Provincial and federal competition bureaus are going to have to approve the deal because if it goes through there would be a virtual monopoly on stock and options trading in Canada. And though this deal is great for shareholders, it will be much more difficult to ascertain whether or not it is in the public's best interest. There is, however, a good chance of it getting the green light under Harper's conservatives.

The conservative government under Stephen Harper, though known to have blocked some deals, especially Potash, will look more favourably upon this deal as it is not a foreign takeover, which can often be a political fire-storm.

Maple's $50 per share offer for TMX is superior to the previous offer they received from the London Exchange, and a breath of fresh air for many shareholders during the current economic and financial turbulence. With current shares of TMX trading well below $50, there is still a lot of upside potential for this deal should it go through.

Happy Investing : )

Comment or E-Mail

Lowe's Losing Market Share to Home Depot. Intituting New Everyday Low Prices. Lowe's Dividends and Profits Should Increase.

Home renovation superstore Lowe's is hoping to revive its fledgling operations with a new everyday low price strategy. Second to Home-Depot, North Carolina based Lowe's has been struggling to compete with Home Depot in recent years as declining same store sales and promotions have trimmed profits. The stock is down 40% from its 2007 high, and is trading for the same prices you could buy it for 10 years ago.

Lowe's has 1,753 stores throughout North America, and hopes to keep adding more as it spreads in Canada and elsewhere.

According to Barron's:

Lowe's "bought back $2.4 billion of stock in the first six months of the fiscal year that ends in January 2012, an amount equal to about 8% of shares outstanding. Last year management set ambitious multi year financial targets, including $3.40 a share in earnings by 2015, sharply higher dividends and $3.6 billion of average annual share buybacks. The company could repurchase half its shares outstanding if buybacks run at the current annual rate, let alone the higher target."

By returning cash to shareholders in the form of dividends and share buybacks, Lowe's management is showing that it has its owners interests in mind. Far too often companies utilize precious shareholder cash to embark on costly acquisition sprees that yield little to no value for owners. When a company returns free cash flow to investors instead of squandering it, the Intelligent Investor should be pleased. To be sure, Lowe's could increase its dividend to 4% and still retain 50% of earnings in the company.

Lowe's is also closing under-performing stores and reducing the ranks of costly middle managers. Currently, Lowe's and Home Depot have a very nice duopoly in the United States, with Rona in Canada providing additional competition north of the border. As the housing market improves in the United States, margins and profits at Lowe's should improve and investors will be rewarded. As a relatively conservative and healthy investment in the American retail and home improvement sector, Lowe's is a solid fundamental choice for the Intelligent Investor.

Cheers and Happy Investing : )

Ireland Escaping the Recession. GDP, GNP, and Consumption are up, but Irish Wages are Down.

This week's Economist notes that the Irish economy expanded at a faster rate then expected in the second quarter. GDP, GNP, and domestic demand and consumption all increased during the same period. Though GDP and GNP increased by only 1.6 percent and 1.1 percent respectively, two quarters of successive growth is a bright spot amidst the doom and gloom of contemporary Europe.

Ireland's economy features a number of characteristics that give it a benefit compared to other nations as they pull out of the recession. It has a highly educated labour force, it is open to free-trade, and the populace speaks English, always a plus in a globalized environment. In addition, the national economy is structured around exports, as they make up about 70 percent of Irish GDP.

Also, corporate taxes in Ireland are very low, and do not seem to be rising like in other nations. Wages too are very low, great news for European employers looking for a hub in Western Europe. But as other countries race to the bottom with regards to corporate tax rates and wages, the entire Euro-Zone may suffer. If consumers in other countries are not making enough money to buy your goods and services, exports and production will plummet.

Stocks Rally on Greek Debt Default Relief. France and Germany Agree to Continue Bailouts.

Stocks Rally on Greek Debt Default Relief. France and Germany Agree to Continue Bailouts.

French and German taxpayers are again backstopping years of Greek excess. In return, Greek's prime minister was forced to once again pledge support for reforms that will hopefully ensure deep cutbacks in government spending.

Investors have been pleased with the news as it prevents, for the time being, a Greek default or expulsion from the Eurozone. The International Monetary Fund and the World Bank will review Greek finances again in the coming days to ensure that reforms are being implemented.

In Europe, all stock markets headed higher on the news, with Germany up over 2 percent. However, Greek debt still stands at 150% of GDP and citizens across Europe's capitals are largely going to reject more efforts to bailout foreign governments.

A milestone in low-cost investing - The Globe and Mail

A milestone in low-cost investing - The Globe and Mail:

How to buy index investments for free:

1. Commission-free ETFs

Online broker Scotia iTrade now offers commission-free trading of 46 exchange-traded funds.

2. Claymore Investments' PAC Plan

Under this pre-authorized cash contribution plan, investors pay a commission to buy an initial position in Claymore ETFs and then arrange to make regular subsequent investments at no additional cost. Check with your brokerage firm to see if it's enrolled.

3. Bank index funds

Costs to own these funds vary, but all are sold on a no-load basis. The best deal is TD's e-series, which you must buy online via TD Asset Management or TD Waterhouse online brokerage.

Wal-Mart cashes in on income gap - The Globe and Mail

Wal-Mart cashes in on income gap - The Globe and Mail:

After the 20th of each month, when government cheques go out, Wal-Mart gets a pop in sales. It gets a surge in business at the beginning of the month, when many people are paid, and softening sales at the end of the month when they run out of money.

At the same time, the retailer enjoys a sales boost in pricier items from more affluent consumers who are returning to the discount chain after having shopped there during the recession.

To respond to these trends, chief executive officer David Cheesewright is dipping into a recessionary-like tool kit that includes weekly price comparisons with competitors; stocking smaller, more affordable packages of diapers and other essentials; $1 greeting cards at outlets next to a dollar store; and beefing up lower-cost private labels. But he’s also testing a new own-brand high-end food line called Our Finest; planning for a smaller city store, dubbed Urban 90, to broaden its customer base; and stocking higher end brands such as Bauer hockey equipment.

Mr. Cheesewright’s race over the past several years to add more Super centres with full supermarkets is paying off, more so in market-share gains than in same-store sales increases, he said. Since 2005, Wal-Mart drove 77.3 per cent of the growth in food, health and beauty and other consumer product sales in Canada, according to market researcher Nielsen. That business makes up more than 40 per cent of Wal-Mart’s total estimated $20-billion of annual revenue.

Good Countries and Economies for Investment. Economic and Financial Indicators of Health for Businesses.

When on the hunt for new investment ideas, macroeconomics, or the larger economic picture can often be over-looked. One source for macroeconomic analysis that provides investors with valuable insights is the Economist. In particular the "economic and financial indicators" on the back pages provide the Intelligent Investor with a wealth of information from which to make broader decisions regarding where in the world to invest your money. This week, six countries or economies stuck out to me as being particularly favourable for the enterprising investor.


The metrics I used to measure the general health of the following economies was their trade balance, current account balance, and general level of interest rates and inflation. If inflation or interest rates are out of control, they should not be considered as stable areas to invest.


1. Hungary. Hungary is poised for substantial growth when Europe rebounds from the doldrums. It has a +$9 billion trade balance, +$2.9 billion current account balance, and a budget balance of +1.9% of GDP.


2. Norway. With vast amounts of oil and natural gas wealth, Norway is poised to be a great provider of scarce resources to the rest of the world for still some time to come. It has a +$63.4 billion trade balance, +$49.6 billion current account balance, and a budget balance of +12.5% of GDP. Much like Canada in its abundance of resources, Norway has been a much better steward of its wealth for future generations.


3. Sweden. Another Nordic economy, Sweden does not benefit from the oil and gas reserves of Norway, but it has a highly skilled and educated workforce. It has a +$12.3 billion trade balance, +$32.2 billion current account balance, and a budget balance of +0.5% of GDP.


4. Singapore. With an excellent base in South-East Asia, Singapore will surely benefit from the significant growth and investment there going forward. As global trade moves eastward, Singapore has much to gain. It has a +$48.3 billion trade balance, +$52.5 billion current account balance, and a budget balance of +0.3% of GDP.


5. South Korea. Another bastion of Asian growth going forward, the South-Korean economy has been an export powerhouse for years. It has a +$40.7 billion trade balance, +$28.2 billion current account balance, and a budget balance of +1.6% of GDP. The important caveat with a country like South Korea is its low birth rate. As the people tend to focus more on consumerist elements of their society, population growth slows and future productivity can be seriously threatened.


6. Chile. The only South American country on my list, Chile is often neglected by investors due to a rough history of corrupt and inept governments. However, Brazilian consumer growth means that neighbouring markets could experience a halo effect and also gain a massive new market for their resources. It has a +$16.6 billion trade balance, +$2.4 billion current account balance, and a budget balance of +0.4% of GDP.


It is often said that a rising tide lifts all shifts. In the vein of investing, this means that the national or macroeconomic picture, if positive, bodes well for the business and investment climate in the country, and for those who invest there.

Investment Bubbles, Manias, and Panics. Remain Patient and Rational when Investing. Tulip Mania, The South Sea Company, the Great Crash.

According to most, an investment bubble could be described as a period of high trading volumes at prices that are at odds or at a high variance above common measures of intrinsic value. For housing, the intrinsic value of the property might be a multiple of its net rental income, for a common stock, a multiple of its book value, earnings, or dividend payments.

During the "dot-com" or technology bubble stock prices for most technology and telecommunication companies were trading well above any reasonable measure of current earnings or dividends. To be sure, a vast number of the companies involved in the tech bubble had little to no earnings at all. Former Federal Reserve Chairman Alan Greenspan coined the phrase "irrational exuberance" to describe the psychology of investors and markets during this time. Many people believed that prices would go up forever because modern technology would transform business and enable them to achieve future earnings that seemed unfathomable only a decade before. So goes the usual mantra at least. More sensible minds, however, would conclude that vast amounts of people, acting of their own volition, chose to casually disregard all semblance of reason with regards to corporate fundamentals and instead act on faith... a faith that other people would be dumb enough to keep buying securities of dubious intrinsic or real value and thus provide someone to whom they could sell their shares at a higher price in the future.

Acts of faith, however, are better left to theological or religious spheres than investment ones. Crowds are prone to turn and panic with little warning and little chance for the average investor to escape. When an investment bubble bursts, unless you got in near the point of its initial ascent, you will most likely be waiting years to recover your losses and return to break-even. And in other instances, your break even point may be unattainable as your investment dropped to zero.... a 1,000,000 % gain on zero is still zero.

There have been numerous investment bubbles and manias over the centuries. Tulip Mania first hit Holland and then began to burst circa 1637. During this time, a single tulip bulb could fetch the price of a home or 10x the annual earnings of a skilled craftsman. Rational? Of course not, but investors were hoping that another sucker would come along and buy their tulip bulbs for a little higher in a week, month, or year down the road. They wanted to ride the upsurge in tulip bulb prices and make it rich quick.

There was also the South Sea Company and Mississippi Company Bubbles of the 1720s, the Railway Manias of the 1840s, the Great Crash of 1929, and countless others on markets all around the world. What propels bubbles? Behavioural psychologists could undoubtedly write books on people's particular motivations, but stupidity and greed mark the top of my list. If something does not make money, don't buy it. If it would take over 25 years to make your money back given present earnings levels, move on to another investment. There is no need to succumb to get rich quick schemes when honest rational investments are in plentiful supply. Rationality and patience will always win the day in the investment business, it just might take some time, and a fair amount of resistance to greed.

Buffett Gives Bank of America Substantial Boost. Warren Buffett to Invest $5 Billion in BAC.

According to Canada's Globe and Mail:


"Warren Buffett will invest $5-billion (U.S.) in Bank of America (BAC), stepping in to shore up the company in the same way he helped prop up Goldman Sachs and General Electric during the financial crisis. Bank of America shares rose 12.3 per cent to $7.85 in early trading, erasing some part of the stock’s August losses. The jump also makes the warrants for Bank of America shares that Mr. Buffett gets in the deal instantly profitable."


"Mr. Buffett and Bank of America said he made an unsolicited call to the bank on Wednesday morning, offering to make an investment. Even though the bank has said it did not need to raise capital, investors widely believed Bank of America needed more money and to show it could raise funds easily."


http://www.theglobeandmail.com/globe-investor/warren-buffett-buys-into-bank-of-america/article2141428/

BMO Bank of Montreal Posts Strong Earnings. BMO U.S. Banking Operations Contribute to Profit. BMO Dividend is Strong.

BMO Bank of Montreal (TSE: BMO) released very promising results recently. Bloomberg Markets reports that profit at the Canadian bank rose 19 percent on higher investment banking earnings and positive results from its recent U.S. acquisitions.


Income at BMO rose to $793 million, or $1.27 per share for the quarter. BMO has now increased its profit for nine straight quarters and is showing incredible consistency and stability in its operations. It now has the longest streak for increasing profits among the six large Canadian banks. It is clear now that the Canadian banks are in very good shape. BMO is now Canada's 4th largest bank by assets.


In the United States, the BMO completed its $4.1 billion takeover of Marshall & Ilsley on July 5. This doubled its total U.S. branches and deposits in the area. Incredibly the bank now has more branches in Chicago than Toronto. Marchall & IIsley contributed $32 million in profits to the bank this quarter. Much better than previous losses it was experiencing.


Happy Investing : )

Aeropostale Losing Promotional Edge. Abercrombie, American Eagle, and Others Tearing Down Margins. But Aeropostale Flush With Cash.

Aeropostale is seriously losing its edge in the promotional business. Competition in the teen apparel industry is increasingly fierce and margins are under intense pressure as Abercrombie & Fitch and American Eagle Outfitters, among others, are embracing discounts and offering more clearance and promotional sales. In addition, cotton prices have rocketed upwards during recent years, and have only now started to show some signs of subsiding.

The stock has fallen below $12 per share recently and investors are anxiously awaiting its next earnings and sales numbers, as last quarter's were atrocious, with both margins and sales tumbling by double digits. So why would any investor still consider owning the company? They have piles of cash still left on their balance sheet, and have no long-term debt whatsoever. Why is no-debt significant? Because when the company makes a dollar in earnings, all of that earnings can be designated towards something that actually improves shareholder value, such as: share-buybacks, capital expenditures, expansion, or dividends to shareholders. In other words, the shareholders actually own the whole company, unlike many businesses, which are owned by shareholders and a conglomeration of banks and creditors.


Financially, the company is healthy, and they are still making a decent profit, so if next quarter's numbers reveal a bump up or stabilization of sales and revenues, this stock will be cheap, very cheap. But until then, fashion is a horribly fickle business and notoriously difficult for the Intelligent Investor to predict. The proof for this company will be in the sales data.

Google Boosts Android Wireless Business and Buys Motorola in Largest Acquisition. Microsoft, Apple, Research in Motion, Nokia on High-Alert.

In an effort to boost its Android operating system, and increase market share in the highly competitive mobile phone industry, Google is buying Motorola for $12.5 billion in cash. This is Google's largest acquisition ever, and a clear indication to its competitors in the mobile space that the company is willing to utilize the significant cash at its disposal to dominate the lucrative and growing smartphone market. Apple, Research and Motion, Nokia, and Microsoft will all be on high-alert after this deal.

The deal values Motorola at $40 per share, or a whopping 63 percent premium to its closing price on Friday. Google paying such a huge take-over premium for a company may be a clear indication that current prices for other mobile manufacturers like Nokia and Research in Motion are depressed and poised to rise over the next twelve months, especially if Microsoft decides to fight fire with fire in the mobile handset wars and buy Nokia or RIM.

Google has been gaining significant market-share recently with its Android platform, but a lack of intellectual property in the wireless area was hampering its growth. Instead of innovating on its own, and devoting significant time and resources towards research and development, Google just bought a company with existing patents and previous research completed.

Earlier this month Google's competitors, including Apple, Microsoft, and Research in Motion, bought a significant patent portfolio from Nortel, effectively blocking Google from the process.

Google states that it will run Motorola as a separate business and close the deal by the end of this year, or the beginning of 2012.

More at the Vancouver Sun.

Happy Investing : )

Research in Motion Releases new BlackBerry Line-Up to Compete with Rivals: Bold 9900, Torch 9810, Torch 9850 on BlackBerry 7 OS.

In a much better attempt to compete with its rivals, Research in Motion (TSE: RIM) is releasing three new touch screen enabled phones. The biggest development is their decision to release a phone with no QWERTY keyboard at all, which looks more like many Android models. All of the new phones will run on RIM's new BlackBerry 7 operating system, and have faster processors than their predecessors.

The BlackBerry 7 OS will offer better web browsing and approximately 40 percent better performance than BlackBerry 6. The new system will surely be powerful, but investors are still waiting on the release of the QNX operating system, which should be on RIM's next models to mesh better with the user experience of the PlayBook.
The specifications for the new models are detailed below. The new Torch 9850 will be the new game changer for RIM, and should receive some initial success, and give the company and its investors some time before the release of their QNX phones.

Bold 9900

• 2.8-inch 640×480 (VGA) screen
• full QWERTY keyboard. 
• 1.2GHz processor 
• 8GB of on-board storage 
• MicroSD card slot
• 5MP camera that can record 720p video. 
• NFC chip (could be used as a wireless credit card)

Torch 9810

• 3.2-inch “high resolution” touch-screen
• 5MP camera with autofocus and “HD” video recording
• slide-out QWERTY keyboard. 
• 1.2GHz processor

Torch 9850

• 3.7-inch screen, the largest of any BlackBerry smartphone, 
• Liquid Graphics technology
• 1.2GHz processor
• 4GB of internal storage
• MicroSD
• 5MP camera with autofocus

Importantly, the company is releasing their phones simultaneously throughout their developing markets and North America, which should lend them a sales increase and an influx of cash for new research and development. Overall, the release looks promising and investors should now wait a couple of quarters to see how earnings, and free cash flow, come in the door.

Happy Investing : )

Behavioural Psychology and Investing: Be Aware of Investor and Stock Market Expectations.

Behavioural Psychology and Investing: In his book “The General Theory of Employment” renowned economist John Maynard Keynes devoted a wonderful chapter to investor expectations. In the book he notes that investors are generally concerned “not with making superior long-term forecasts of the possible yield of an investment over its whole life, but with foreseeing changes in the conventional basis of valuation a short time ahead of the general public.” The basic premise of his theory is that in determining the value of an investment, a lot of fundamental and intrinsic value analysis can be a waste of time when all that really matters is what other people, on average, will think that the stock is worth over the next few months or years.

Of course, if you were buying the whole company, the most important thing to you is going to be earnings, and future earnings, because that is the money that you will put in your pocket. As a short- term investor, however, you only want to know what other people might pay for your stock over the next little while. In this case, the emotion of the investing public plays a crucial and pivotal role. Investors like Keynes have been highly successful at times by trying to predict the emotions of the general public and how this will affect the price of securities.

One very simple, but sometimes very effective strategy is to always buy your stocks on pessimism and sell into positivity. Remember, if everyone is already positive on a stock that means that there might be very few new buyers. If people are largely negative, a shift in company news or opinion could result in a stream of new buyers. Also, if you own a company whose shareholders have high expectations, be careful at the first sign of bad news... it could mean a stream of new sellers. As Warren Buffett always says “Be greedy when others are fearful, and fearful when others are greedy.”


Happy Investing : )

Weston Family Buying Ogilvy Department Store. Loblaw, Weston, and Holt Renfrew Owners Expanding Selfridges in Canada

Canada's Weston family, the controlling shareholders of Loblaw Companies Ltd. (TSE: L) and George Weston Ltd. (TSE: WN), are buying the Ogilvy luxury department store in Montreal. This store will be a great addition to the family's growing international portfolio of high-end retail / fashion stores.

The Weston family operates its department stores under the corporation Selfridges Group Ltd., which is headed by the family patriarch Galen Weston

Selfridges also owns a number of other retailers:

Holt Renfrew in Canada (founded 1837, nine stores).
Selfridges in the U.K. (founded 1909, four stores).
Brown Thomas in Ireland (founded 1849, seven stores).
De Bijenkorf in Holland (founded 1870, 12 stores).

Canada Maintains Stellar Credit Rating. Canada Rated AAA by Moody's. Global Investors Pour Money into Canada.

Amidst a spreading financial crisis, and an effective default in Greece, Canada has maintained its status as a safe-haven for global investors. Though a number of analysts are expecting that there might be a housing downturn sometime soon, Canada's overall financial situation is a bright spot in today's gloomy economic climate.


Moody's stated that Canada has a "high degree of economic resiliency, a very high government financial strength, and low susceptibility to risk." This is in stark contrast to the United States, which is drowning in government spending and soaring deficits. Will the United States default? Probably not considering the calamitous consequences that it would have on international finance. American businesses and their bankers would much rather ensure that the United States experiences inflationary pressures from monetary easing rather than a default on its debt. 


Canada's triple A credit rating is the highest possible, and it has maintained this rating since 2002. Of course, if the Harper government continues on its current course of deficit spending, we will not be able to maintain this rating, and higher interest rates will surely result for the government. Interestingly, only 16 countries in the world still possess a triple A rating, so Canada is in an elite pool, and this has caused investment to pour into the Canadian market. This has caused our currency to increase and for interest rates in Canada to stay relatively low as compared to most other nations. Globally, investors feel safe keeping their money here, and that means that the federal government does not have to offer competitive rates in order to attract the loans that it needs to operate.


Some additional information concerning this topic is in the Toronto Star.

How to Value Stocks? The Dividend Discount Model (DDM), a Rational but Clumsy Approach that Focuses on Dividend Growth.

Often investors ask me how they should "value" a stock. There are a number of interconnected ways that the Intelligent Investor can value a stock and determine what they believe to be a fair value for it. One way that has fallen out of favour in more recent years is the traditional approach of the "Dividend Discount Model."

(Fair Stock Price) = (Current Annual Dividend) / (r) - (g)

Be aware, the dividend discount model has a number of assumptions that must be made by the investor in order to arrive at your "fair price," but it is a nice start, and it at least ensures that the investor engages in some rational analysis at the start of their quest for the right company.

The first assumption that the Intelligent Investor must make when using the dividend discount model (ddm) is something called the "discount rate," (r). I like to think of the discount rate as the amount of money that you could rationally be making if you simply invested elsewhere, plus inflation. For this rate, I like to use a corporate bond index, other investors often use other metrics, but like I said, the ddm has many inherent assumptions that must be made. Currently, the rate on High Yield Corporate Debt in the United States is 7.35% (Bloomberg).

The second assumption that must be made by the Intelligent Investor is the growth rate of dividends, (g). Here, it is wise to use the historical 5 year average of the stock you are examining. However, remember that dividends can be reduced! So be very conservative in your estimates of dividend growth. The more stable the company and business, the more accurate this will be. To add an extra level of caution, I also like to subtract the current inflation rate, which is always making your money less valuable in the future than it is now. Currently, inflation is 3.1% in Canada.

Now here is a real world example to illustrate how the model works.

Coca-Cola is a name most are familiar with.

Therefore,

(Fair Stock Price) = (Current Annual Dividend) / (r) - (g)

FSP = $1.88 / (0.0735) - (0.09 - 0.031)
FSP = $1.88 / (0.0735) - (0.059)
FSP = $1.88 / (0.0145)
FS = $129.66

Clearly, since Coca-Cola (NYSE: KO) is trading at $69.31, Coca-Cola's Fair Value seems extremely high. Why did the model produce this result. Two main reasons. First, very low current bond rates have created little reward for investors seeking an alternative to stocks. This makes stocks seem more valuable. Secondly, Coca-Cola's unusually high average of dividend increases. Coca-Cola has a very strong record of increasing its dividend every year, which makes it appear particularly valuable when a model that favours dividends is utilized. 

Happy Investing : )

Research in Motion Layoffs. RIM Laying-Off 2000 Employees to Save Costs. Number in Canada not Announced.

Canada's Research in Motion (TSE: RIM) will be laying off 2000 employees in order to save costs. This represents more than 10 percent of the company's workforce, and is more lay-offs than many analysts had previously expected. Some think that this might mean that the situation at the company is worse than expected, but others maintain that it is just an important part of their restructuring efforts to increase corporate profits.

According to RIM, the reduction is: "a prudent and necessary step for the long term success of the company and it follows an extended period of rapid growth within the company whereby the work force had nearly quadrupled in the last five years alone.”

RIM has not announced where the lay-offs will take place, but if the company hopes to save any substantial amounts of money, they will probably be from North America. More information on the cuts will be announced on September 15th, and chief financial officer Brian Bidulka will oversee the cost-cutting program.

The major worry with the investment community is that these lay-offs may not be focusing much on the future, but on quickly shaving costs for short-term gains in profits. However, it is important that the company is moving quickly and indicating to the public markets that it is actively looking after shareholder resources. A major danger, however, is that human capital is crucial in the technology industry, and having your employees move elsewhere means that they can take their valuable ideas and intellectual capital with them.

Happy Investing : )

Loblaw, Shoppers, GE Announce Earnings for the Quarter. Corporate Profits are Healthy in Canada and the U.S.

General Electric (NYSE: GE)

Revenues and profits soared for the world's largest manufacturer of jet engines and turbines for power plants. Second quarter profit came in at $3.69 billion, up from $3.03 billion last year. On a per share basis this is 35 cents versus 28 cents. This is a healthy gain for a company once written off by many during the recent recession.

Revenues fell slightly to about $36 billion as it sold the majority of its stake in NBC Universal to Comcast Corp. Considering, however, that analyst estimates for GE had been $35 billion, the slight decline is good news. The major developments in the company during the quarter were in the area of its energy business, which made acquisitions totalling over $11 billion. In the future, the upside potential in this business for GE could be substantial.

For more on GE check out Reuters News Service.

Loblaw Companies Ltd. (TSE: L)

Canadian grocery heavyweight Loblaw Companies Ltd. announced stronger second quarter results today. Loblaw's earnings came in at $197 million, or 67 cents on a per share basis. Last year, Loblaw's earned $181 million or 64 cents per share. Revenues also rose by a small margin to $7.28 billion.

However, all is not good news at Loblaw. Already competing against Wal-Mart, Sobeys, Metro, and Costco, the company will soon by vying with Target, which will surely take a bite out of both its grocery business and new Joe Fresh line.

Employee wages, however, have been under intense pressure at the retailer and the UFCW has been unable to effectively keep wages much higher than they are at competitors. Cheaper labour costs will undoubtedly give Loblaw a fighting edge, even though its employee morale is said to be in the basement at most stores.

Shoppers Drug Mart (TSE: SC)

Canada's largest drug store chain announced higher quarterly results today. Even without a permanent CEO, the company edged out many of its rivals and reported a second quarter profit of $148 million, or 68 cents per share. Last year, the company earned $146 million or 67 cents per share. Since analysts were looking for a per share profit of $67 cents for Shoppers, they beat estimates by a penny, and, overall, performed reasonably well.

Performing particularly well were its "front-of-store" sales, which include the items most commonly thought of at Shoppers next to prescriptions... cosmetics etc. Non-prescription sales at Shoppers were up 3.8 percent, which more than made up for a decline in prescriptions of 1 percent.

Many Shoppers' shareholders, including myself, have been worried as of late about the decline in prescriptions due to generic drug pricing in Ontario, and the loss of the company's CEO, but as the numbers indicate, profits are rising, albeit slightly, and good money is being made. Hopefully a new CEO is found soon,  but until then, just stay the course with this Canadian retail gem.

Happy Investing : )

Some U.S. Stocks to Watch. IBM, BAC, TOL, JPM. American Dollar Hits New Lows.

IBM (NYSE:IBM) recently announced that it expects to earn $20 per share by 2015. Of course, any prediction that is so many years down the road has many inherent assumptions, and thus is almost certain to be wide of the mark. IBM, however, has been on a tear recently and business is booming. Currently trading at $183 per share, and up over 40% on the year, many investors have missed the party... but buying a well-run business at a reasonable price is a lot better than buying a poorly-run business at a discount.

Bank of America (NYSE: BAC) has recently fallen below $10 per share. This price is a 25 % discount to the company's tangible book value, which will surely be a buying signal for many value investors. Bank of America is highly levered to a recovery in the U.S. economy, so if the American economy does well, look for Bank of America to experience some serious up-side in price.

JP Morgan & Company (NYSE: JPM) - Best in class U.S. bank. Recently J.P. Morgan announced a solid quarter with increased revenue, lower credit losses, and rising income.

Toll Brothers Housing (NYSE: TOL) - For anyone wishing to invest in U.S. Real Estate, Toll Brothers Housing is up 25% for the year and is really showing signs of gaining momentum. The stock is finally getting some positive traction amongst investors and it is beginning to stop the bleeding as it posts lower losses in recent quarters. Keep in mind, however, that this company is still dicey, as its bonds were placed in junk status.

Happy Investing : )

Canada's New Pension Plans. Another Victory for Canada's Financial Institutions.

The Canadian government is moving ahead with plans to create another retirement savings plan for Canadians. As if RRSP's, RPP's, TFSA's, LIRA's, LIF's, CPP, OAS, etc. are not enough for the public to juggle, a new optional pension plan, which will run in addition to CPP and OAS, might receive parliamentary approval as early as this fall. 


The plan would offer small businesses and employees who do not already have a company pension plan an option to add to a privately managed "pooled pension." Given that 60 percent of Canadians do not have a company pension plan, something had to be done, but whether this is the answer is far from certain. The investment options that will be allowed to be included inside the new plans have not even been decided yet.


If the legislation passes, AND receives approval from provincial ministers, then Canadians will be choosing from options that are to be managed by private institutions. So the same institutions that manage our RRSP's etc. will probably manage the new plans as well. New entrants could include some of the country's major pension plans as well, which will charge for their management services and pool the money together with their existing members. Overall, this plan will be a great boon for Canada's financial companies, which will have yet another, government sponsored, way to charge Canadians more fees.


Surely there will be more news on this plan as it develops, but for now, expect the banks to be gearing up for another marketing bonanza. TFSA's were not that long ago, and now they will have another opportunity from the Canadian government to attack our wallets.


More information is at the Vancouver Sun.


Happy Investing : )

Why Microsoft Should Buy Canada's Research in Motion. It is a Better Target than Nokia or Yahoo.

In a recent article for the Rhodes Capital Blog, Sean Farhy outlines an excellent argument in favour of Microsoft's acquisition of Canada's Research in Motion. The price he mentions that would be appropriate is $49 per share, well above today's current price of around $27 and a healthy premium for investors should a deal like this ever materialize. To be sure, if the situation at RIM gets much worse, the management will shop around for a suitor and happily take a fat golden handshake... leaving their shareholders with a wad of cash on hand, or ownership in a stronger combined entity. 


"Microsoft (MSFT), like City Hall, is the established bureaucracy and its stakeholders often feel like powerless constituents. Unfortunately for the small investor, the lack of a democracy in a stock proxy only empowers Steve Ballmer and his administration. Mr. Ballmer will play the role of our Mayor, a career politician who has done absolutely nothing for the stock price since he has come into office." 


Microsoft sits on almost $50 billion in cash, or $5.78 a share and also pays a dividend of 2.7%. Earnings are expected to be over $20 billion going forward- Mr. Ballmer, surely you can do better than maintaining your failed policy of executing the status quo? The first trial into the smartphone market failed within weeks and the likelihood of creating another profitable organic hardware system like the X-Box is virtually nil. What needs to be done is something extremely logical and affordable. Rumors were that Microsoft was going to partner with Nokia (NOK) and there was even more speculation that Microsoft was then going to buy some or all of that company. Forget about buying Nokia (which you’ve done, correctly I might add). If Microsoft is on the acquisition path, Research in Motion (RIMM) is more compelling purchase.


"Research in Motion’s market cap is now under $20 billion, with no debt, plenty of cash flow, and a solid footprint in the smartphone market. Nokia on the other hand is larger, leveraged with high-yielding debt, and offers product lines not applicable to Microsoft’s core business. Blackberry currently supports Windows and MS Office so further integration would appear to be easy to accomplish. So if the rumors are right, and Microsoft is going to make an acquisition- Research in Motion would appear to make the most sense."


Abstracts are from the Rhodes Capital Blog


Happy Investing : )